Article : Share Repurchases: Short Term Effect In India

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In the lights of recent changes introduced by SEBI on buyback of shares, the paper intends to provide insights on the share repurchases in India by conducting event study methodology to find out the effect of share repurchases on stock price. We find out negative abnormal returns prior to the announcement of buyback during 2011-2012 indicating undervaluation of shares and positive abnormal return post announcement indicating signaling effect of share repurchases. Besides, a small company tends to have higher price reaction than larger companies due to higher information asymmetry faced by small companies. The results are similar to the study of open market repurchases in Developed countries. The paper will also serve a benchmark for future study on repurchases.